"The End Game: 2012 And 2013 Will Usher In The End" - The Scariest Presentation Ever?

Tyler Durden's picture

If Raoul Pal was some doomsday spouting windbag, writing in all caps, arbitrarily pasting together disparate charts to create 200 page slideshows, it would be easy to ignore him. He isn't. The founder of Global Macro Investor "previously co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe... Raoul Pal retired from managing client money in 2004 at the age of 36 and now lives on the Valencian coast of Spain, from where he writes." It is his writing we are concerned about, and specifically his latest presentation, which is, for lack of a better word, the most disturbing and scary forecast of the future of the world we have ever seen....

And we see a lot of those.

Consider this:

  • We are here...

  • We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first major bank…
  • With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.
  • There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.
  • The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…
  • Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations
  • From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.
  • And then do you think Japan and China would not be next?
  • And then do you think the US would survive unscathed?
  • That is the end of the fractional reserve banking system and of fiat money.
  • It is the big RESET.

It continues:

  • Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase).
  • The whole bond market will be dead.
  • Short selling on bonds - banned
  • Short selling stocks – banned
  • CDS – banned
  • Short futures – banned
  • Put options – banned
  • All that is left is the Dollar and Gold

It only gets better. We use the term loosely:

  • We have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses.
  • Spend your time looking at the risks of custody, safekeeping, counterparty etc. Assume that no one and nothing is safe.
  • After that…we put on our tin helmets and hide until the new system emerges

And the punchline

From a timing perspective, I think 2012 and 2013 will usher in the end.

Enjoy:

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Alea Iactaest's picture

@ Flacon. Here's what I did since I couldn't find a way to save the imbed file. There's probably a faster way but it worked.

- Get original Scribd link and pull up full page view of the deck. Find it at http://www.scribd.com/doc/95493792/The-End-Game

- Use screen capture to highlight and save an image of each slide (32 in all). Each image was saved to my desktop (5 mins).

- For simplicity I dragged each screen shot into a temp file

- Open Keynote (yes, I'm working on a Mac... please don't hate). I don't know if this would work in PowerPoint.

- Select all screen shot files and drag them into a new presentation in Keynote.

- Print as a .pdf and now I've got one continuous electronic file.

This whole thing took about 6 minutes.

NOTfromSanFrancisco's picture

 

Copy and paste it into "Word" or copy and paste it in an email to yourself...

Jena's picture

That worked for me, thanks!

RafterManFMJ's picture

Same. Can you print this, and how?

chump666's picture

100%.  Governments do not manage asset values, they support them (like commies tried to do...and look what happened to them =  FUBAR), but once the HUGE tidal wave of liquidation takes place.  Nothing on earth will stop it.

Great clip.

onelight's picture

Were there 2009, 2010 and 2011 versions of that Total Worldwide Economic Collapse video?

Seems like I have been hearing this every year, for a long time.

(maybe it is this year, but..)

Ness.'s picture

Rome didn't collapse in a day.

Axenolith's picture

Sure enough it didn't, but there were a couple generations of misery before it did, and that was minus the instantaneous communication, electronically dependant transportation/process control systems, and multiple independantly targeted reentry vehicles...

Aquiloaster's picture

The reasons you mention for why the end is farther are the exact reasons I would have cited for it being nearer. The inter-dependence of everything (which means less self-sufficiency) and the quickness with which news travels assures that this time things will move faster. . . or did I miss some sarasm in your comment?

Jendrzejczyk's picture

Read Axe's comment again....several times.

CPL's picture

That's been my theory as well after sorting through too many history books for fun.

 

The faster information travels the faster/shorter timeframes between collapse.  Or more specifically the organisation of the information and the complexity of how it's organized and distributed.

New_Meat's picture

collapse or withdrawl into protective situations (which would include stopping of commerce)?  Information flows (v.), bad news is assimilated, better reactions???  Or things go to shit because of the impulse of bad news everywhere?

Is there an impulse of bad news?  I think not--the vast majority of news outlets are O-laid drinkers who can not find the truth/adequate and accurate descriptions of current events.

Good comment, but it isn't the speed of the information spread, it is the latencies in the spread and the uptake into carbon-based thinking  machines that slow down the spike (integrate the delta function).

"... after sorting through too many history books for fun."

Well, a greenie on ya for macabre sense of "fun."

- Ned

{there's something about "madness of crowds" that goes back to the so-called 'French Revolution', you know, the one where anyone who was <... of certain anti-statist categories that you can fill in this blank and be incomplete...> sentenced to Mme. Guillotine.}

Kamehameha's picture

Rome did not have a global internet and electronic banking.

smb12321's picture

If you're a regular ZH reader you hear it not every year but every day.   It reminds me of the dot com crash when expert after expert (quote unquote) swore that [filll in number] was the lowest it could go. Naturally, when that was passed a new number was offered without shame. 

No one knows when economic collapse will occur but it only seems logical that things will get much worse beforehand with enormous swings and a MUCH worse economy than we now have.

ChrisFromMorningside's picture

In a way, the grand collapse already happened. The "developed world" took a collective nosedive over a decade ago when they replaced productive (i.e. primary and secondary sector) economic activity with service sector and government economic activity and concurrently elevated FIRE to its place at the top of the pyramid. The damage has been done. It was just masked for years by fraudulent numbers.

Fraud #1 being the false idea that money circulation = GDP. In reality, ringing up some groceries for a customer is not a "productive activity" in the same way that, say, manufacturing a computer is, even though its possible for the grocery bagger to technically "create more GDP" if he faciliates more money circulation. In reality, economic productivity can only be measured when qualitative, and not just quantitative, judgment is utilized. But the current crop of economists hates that as it requires critical thought and they want everything to fit purely numerical models.

Fraud #2 ... Well ... As Mr. Pal points out, we have a system where $70 trillion in unpayable debt is the collateral for $700 trillion in paper "wealth" that holds immense purchasing power but does not represent any kind of tangible or physical asset. Yeah, need I say more? You can sum up fraud #2 as "paper".

All that is going on now is people are pointing out that the Emperor is naked. The 'reset' is the moment when the Emporer finally has to admit the truth and deniability is no longer plausible.

illyia's picture

Again and again I ask and never receive an answer - But I Will Try Again:

 What if all those derivative contracts were retroactively declared illegal??? And, do not say that they cannot be. USAGov has rewritten tax law, criminal law - all sorts of laws - retroactively applicable.

What happens if it becomes apparent that all those 700 trillion (I hear even more from other sources) are declared nul and void?

First off: Game over for the banks and corps who are depending on them to "balance" their books. Oh. Really. Not.

Second off: Governments who backed the deriv gamers are dead in the water. Maybe some are really dead. Like. Thats. Not. Going. To. Happen. Anyway.

Third off: The living humans are left with algebra. Cross off the self-cancelling debts. Make arrangements with those who are owed. Under the circumstances who is going to fight getting something. The alternative is nothing.

Those Over The Counter, Off Balance Sheet Derivatives are going to die. That is the result either way. Might as well spare the people the pain of being dragged through what Greece is going through on a blow by blow. Just end the monster. It. Is. Dead. Anyway.

 

theTribster's picture

Same thing as a default would occur I suspect - regardless, we will still end up in the same place.

oldman's picture

@illiya

Illiyya,

I don't know the answer to your question, but I have thought the same for three or four years now. Why not "just call the whole thing off'?

Why not simply nationalize the deposits in the banks, and the shithouse collapse? Perhaps we would only get a small fraction in cash, but we would as a society , at least, own the assets free and clear of the criminals' negligence: and have some fucking dignity as a people. This is a really bad idea, of course, but better than anything on the table, if we want to hold together as a nation. If no one cares about the 'other', the neighbor, the old woman/oldman. the children ------------------------------fill in the blanks that I have left open, please.

IF NO ONE CARES---well, then fuck it---get your weapons and go to the mountains with your gold and silver------but someone will eventually come for you-----maybe a lot of someones----

I like your idea because this extreme event can be survived and we can come out of it a tighter and brighter society--------I won't be here, but friends and family will be and a lot of others, who if I knew them ,I would also want to survive------think Argentina, think Iceland, think Greece----they will make it as will the Spanish and the Italians and the French----they will survive because they collaborate and work shit out that we do not have the patience and tolerance for------I haven't seen much capacity for survival in the last two years in the US. I was in and out several times, hitch-hiking rides, walking long distances, sleeping in the redwoods, on the beaches, staying with friends and family, and asking questions and LISTENING to the responses

And I have little faith that the US will hold together like many other nations will

I am really sorry I wrote all of this

I truly hope that I am absolutely wrong

But if we see what this dude foresees

None of us are prepared for it/ and it is not funny

I wish I hadn't of read this piece--------------om 

New_Meat's picture

oldman:

"Why not simply nationalize the deposits in the banks, and the shithouse collapse?"

They (and I am not sure it is the TPTBz) will.

I'm kinda' shop worn, p'raps like your handle.  How are your knees?  Your family?  Kids?  So you pull up stakes and move---where?  The general question is the same.  JWR and many others discuss this.  There is a reason why today's population density is as it is.

A shift as you discuss might be OK in numerical terms, but would not at all be correct in percentage terms.

As an example, consider un-assing New Orleans in the face of Katrina. {OT-her face was beautiful}.

Catchin' on?

- Ned

oldman's picture

@Ned

Ned,

Knees are great walk 12klicks a day, body surf for an hour or so, do zazen for an hour---all after orthoscopic surgery in 1988----so the knees are great.

My family is family and you know how that goes----try being human with six thousand million other people on the planet-----not so easy, right? Anyway, i am an old man and for family----though they would never say so---an old man gets in the way a lot. And from birth, I never felt like I was a part of the family---I didn't come complete---that part always missing, so I have etter contact with those family members who I am close to, that I am FRIENDS with also. Kids are part of that, though, grandkids are very special for an old man---very close because I am there age getting younger and they are my age getting older---make any sense to you?

Where to move to is the easiest question of all: a place you want to live in! Not a place to hide out, to be safe, blah, blah, blah-----I decided when I was a really young guy that I would be naiive as opposed to suspicious and guarded----been expensive, but worth every bit of 'loss' it has cost. I'm not agressive enough to be a 'gold and guns' dude, though, I am armed and did lose some coins somewhere------

If you find aplace where you WANT to live----you will always find a way to adapt to the environment, whatever environment it turns out to be. That's how I see it----but then I try not to complicate things.

Population has flattened in my estimation and there is no reason to assume that the birth rate will increase; I suspect that it might be in microscopic decline already. The problem is the mortality rate: we are living longer, but not naturally or in good health, at least in the US and Great Britain. This is sucking up a lot of resources with a really shitty health care system that no society can afford just to maintain living corpses; it cannot continue and everyone in the health care profession has known this for decades. If I can live out my life naturally, then I am interested----but as a sick oldman----well, I don't know yet---not interested now.

And the shift is here---we are really discussing not that fact, but rather

Are we going to lay down like whipped dogs and hope someone feeds us, or are we going to show some dignity and say, "No-----Not OK---We will not pay! And we want all those fucking bonuses paid back or we foreclose on your property to pay off the losses we incurred!'

or something like that-----I'm not discussing capitalism, communism, socialism, darwinism, tribalism, etc.-----what I am about is FAIRNESS and JUSTICE----whether they exist or not is not important. What is important is that the one qwuestion that capitalism always ignored be answered by the newsystem whatever it is.

the question: how do we share equitably the goods and services the society produces.

I heard this question first in the homeof the chairman of the board of------bank of-----texas in 1973. A John Bircher and super capitalist and funny man----an oldman at the time 75 or so, who knew the inside of all of this

enough----i'm slipping into a nostalgic trance

sorry to be so long on such a simple request                  om

 

 

 

Cosmosoft's picture

We have given our hearts away, a sordid boon!
Great God! I'd rather be A Pagan suckled in a creed outworn.

And indeed there will be time    
To wonder
Do I dare
Disturb the universe?    
In a minute there is time    
For decisions and revisions which a minute will reverse.

there's a special Providence in the fall of a sparrow.

If it be now, 'tis not to come, if it be not to come, it will be now; if it be not now, yet it will come.

The readiness is all.

I want to live,
I want to give
I've been a miner
for a heart of gold.

I've been to Hollywood
I've been to Redwood
I crossed the ocean
for a heart of gold

And I'm getting old.

oldman's picture

Cosmo,

Now that is very nice.

thanks              om

Savvy's picture

It's rhetorical, never happen, because the ones with the most to lose are the ones who make the laws.

twotraps's picture

good morning, all this chit chat and you summed it up right there.  No need for economic theory.  I have been asking myself for years how they have managed to slow down this adjustment process and drag it out........precisely for what you say, they need to figure out how to maintain order adn profit from it.  There will be massive rule changes but they will never stop the game for themselves.

bdc63's picture

I agree. 

To me the only wildcard is will the general public - who just lost everyting they have ever known - accept their new fate while the rich and power maintain their status? 

Revolutions have started for MUCH less.  So, when the reset comes will we 'take it' and just move on with our lives (after a period of 'civil unrest' I'm sure), or do we break into fullblown civil/world wars?

illyia's picture

I think you all are far too optimistic. While the elites and power-brokers many make nominal gains on transactions the only way they can "stretch this out" is by printing (as most would acknowledge around here). That act will cause an inglorious end to our system (as is generally acknowledged everywhere). Some of the collateral damage will be martial law oriented policing, capital controls, travel bans, massive dislocation on a scale we cannot imagine.

The alternative (perhaps by popular demand - under extreme pain) would be the financial system exploding. The revenue stream machine exploding. By disallowing the stupid construct of derivatives to the moon and back, much of the future-cast problem is eliminated. The problems would pertain to the current situation - not decades of debt enslavement.

The two results are not comparable... except in initial pain. Rejection of the derivative mountain means elites lose out permanently, but over the long run the people prosper. In essence, this is what Obama should have done on 1-20-08. That is the fail he will be tarred with in history.

i.

oldman's picture

@illiya

++++++++++++++++++++++++++++++++++++++++++++++++

For these words:

"The two results are not comparable... except in initial pain. Rejection of the derivative mountain means elites lose out permanently, but over the long run the people prosper. In essence, this is what Obama should have done on 1-20-08. That is the fail he will be tarred with in history."

Exactamente!!!!!!!!!     And very well said.

Thak you for being so articulate: I feel like I am reading the epithet of the Obama administration---history ass it happened---

I am most encouraged by the show of hands in favor of this thread among such profound apathy to the true problem we have as a human society; to read this and see the suppport for a new way of being is a huge shift because if it is happening among us-----it is happening everywhere.

Thanks illiya, and everyone out there------it is not only gold and silver that is finding it's true value     om

illyia's picture

oldman,

I too am gratified to find some slim reception for this form of honesty. Sorely lacking in every other form of discourse, but ZH and isolated corners of the intertubes. Perhaps Tyler's elevating this article to front and center this late Friday will encourage even more thought.

All ideas on this subject are important and not to be dismissed. These derivative money sinks will drill a hole right through what we cherish - even to destroying our country. The degree to which politicos are willing to twist the truth even as they protect the racket is mean evidence of their danger. Unfortunately, only by sacrificing real people can this monster be temporarily sated.

This needs to be discussed all over the world.

i.

oldman's picture

@illyia

This is being discussed all over the world and has been since 'the close the banks' campaign in Europe in the late 90's which culminated in the notable death of a young hero in '99 or 2000---I don't remember exactly. But I do remember Seattle was when the 'rest of the world' became excited to finally see something of solidatity from the US.

Then the fucking towers fell down and ------------everyone knows the rest. But this is one of the----------no, the only time we have ever joined the the rest. OWS is important, but there are cities throughout Europe where protests have been daily occurences for years if not decades---and they can be fucking bloody, man.

We are finally joining the discussion where the pain and injuries and deaths are accepted as part of the fight.That is what I find so amazing about OWS---like the rest of the world's warriors they are accepting the violence against them as normal reality. I don't have that, not at all!

I respect these dudes and dudettes for their fucking courage----we can be proud of the US only so long as we have people of courage---and we do.

This is a different war----expect a lot of casualties

As you know the money can be burned and reprinted---it is immaterial. Who cares? Remember the chief who gave away his wealth each year---that is how you have a great society without taxes---If Bill Gates gave it all away each December 21 and worked to restore it by the end of the year---then I would believe in capitalism more than I do now---and he would be a great man. As it is------???/ Who can say?

It is a great pleasure to sacrifice as little as we do to gain as much as we can be

Yeah a bunch of dumb meaningless words---so what?    Thanks illyia--I'm glad to know you       om

francis_sawyer's picture

Sorry to burst your kumbaya pow-wow... But despite your good intentions, you should have spent a more productive hour swinging a mattock instead of pretending to be a knight at the round table trying to administer justice for all...

Just the way it is... junk away...

~~~

"Can't we all just get along"?

~Rodney King, 1992

Answer: No... Anymore stupid questions?

oldman's picture

@frances

First of all, there was no question

secondly, we were getting along fine

thirdly, no intentions

I don't know where you are coming from

fight with the wife?

short gold?

Hell, man, I am sorry you are having a bad day-------better luck tomorrow       om

 

Hulk's picture

Now here is a practical fellow who has split some wood...

barliman's picture

 

Trying to declare them illegal, null and void, what have you ...

is EXACTLY the same as saying, "Why not set pi equal to 3.000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000?"

Declaring it to be so and dealing with the consequences are two things that are not equal to one another.

(BTW - do not take this as a personal attack. You asked a valid question - the answer, however, is hard, ugly and not for the sensitive or simplistic.)

Some of the larger consequences:

  • WHO takes the first loss? WHO agrees to voluntarily go belly up? This is not checkers or chess. This is global economic trade covering things like FOOD and OIL shipments. So who wants to be sitting in the dark and starving FIRST?
  • Saying it is GAME OVER for the banks and corporations is an OWS simpleton's view of the world. The issue is NOT the wealth of the 1%. The issue is JOBS, growth and opportunity for the 99%. Shutter all the banks, close all the multi-national corporations and seize the wealth of the 1% - BUT WHAT are you going to do LITERALLY tomorrow when people in the bulk of the world can no longer buy food because the fiat currency systems collapse because the interest rates for ALL countries are 15%/annum and rising? The majority of derivatives are hedges of government debt in one form or another.
  • The derivatives are the economic false sense of security created to generate a global "wealth boom" over the past 10+ years. They SHOULD have been taken apart over the last 4 years. That did not happen because the Bernanke's of the world believed they were smarter than the markets and KNEW the first country to try to unravel them would pay the highest price economically (see the first two bullet points). They decided to try to set pi equal to 3.0000000000000000000000000000000000000 themselves when they started down the path of attempting to devalue their respective fiat currencies. If one country does it, it helps ... some ... for a little while. When every country tries to race every other country to the bottom on currrency devaluation - IT DOES NOT WORK AT ALL.
  • What would have been a global depression in 2008 initiated by unwinding the derivatives would have beggared countries that think they are wealthy but are not. Foremost among them - China, Russia and Japan.  Please note the first two countries have nuclear weapons. China has a lot of people and not much else in terms of global scale resources (rare earths are NOT exclusive to China - it has just been the cheapest source). Russia has some notable oil and gas reserves - but it does NOT have a functioning government - it is a mafia state which NO ONE trusts.  Japan's wealth has been spent on 20+ years of trying to avoid an economic depression that would have lasted up to decade - by instead having a constant recession made worse by inherent economic and political corruption. When two nations with nuclear weapons wake up one day and are told, "Yea, this whole capitalism thing is subject to bubbles and when we have to do a reset every 40 years or so ... well, there's no easy way to say this ... you're broke and are going to have to start OVER." Those two countries are likely to take a FTW attitude and start taking things or blowing them up.

Again, not a slap at you ... those are just some of the reasons NO ONE is willing to say the party is over with regard to derivatives.

I have said it on here many times since I became a member ... THIS DOES NOT END WELL.

And any idiots thinking they understand the scope of those words by replying about GOLD, BRASS and LEAD are punks who have NEVER been shot at or lived in the world of violence.

If you think what is coming with the inevitable global economic collapse is anything other than the worst things you can not even begin to imagine, hold tight - you are going to find out.

barliman

oldman's picture

@barliman

Glad it is you, barliman and thanks

  • FIRST?
  • Saying it is GAME OVER for the banks and corporations is an OWS simpleton's view of the world. The issue is NOT the wealth of the 1%. The issue is JOBS, growth and opportunity for the 99%. Shutter all the banks, close all the multi-national corporations and seize the wealth of the 1% - BUT WHAT are you going to do LITERALLY tomorrow when people in the bulk of the world can no longer buy food because the fiat currency systems collapse because the interest rates for ALL countries are 15%/annum and rising? THe majority of derivatives are hedges of government debt in one form or

It is a simple game, dude.

When there is a need, real jobs are created. Someone has to grow the food, market it, transport it, buy and sell it, cook it, eat it, and someone has to wash the dishes. Jobs are created---trash pick up, shoe shining, delivering----real jobs. Not a hundred grand or a million or even a bonus---but real jobs for real people.

Not everyone wants everything in the world under their thumbs---most people just want to eat two or three times a day, have shelter and a bed to sleep in, a cup of coffee in the morning, something to do for a few hours each day, a warm body to sleep next to at night, and to have regular bowel movements-----most people are happy with these few luxuries in their lives.

So maybe we ride a bus instead of driving one person to a vehicle, live in a neighborhood where there is no security guard or country club---the rich can still have it---I don't care how much they have---some people are willing to pay the price for money, fame, sex---I'm not nor are most people on the planet. So we don't care---we'll do the things that are too dirty, too insignificant, too frustrating, too poorly paid---we just want to live out our lives-----not own the world or be 'somebody'---those are special things for special people-----We don't care, but we are here with you and you need us---and we need you

But people, among people, are more important than whether or not everyone is equal, or rich, or with university degrees, or goes into outer space.

The deal is that we did not rise up and say 'No, you will not put us in debt for the next two centuries---you will not give the banks---taxpayer money to bail themselves out of their misdeeds of greed----you will not allow them to charge us 20% for credit card debt or college loans or water or air to breathe-

No, we did not say any of these things---we don't care and WE CANNOT PAY, but we're here, so figure it out and get back to us because this end game shit is just not fucking acceptable!

I wrote above that I was glad it was you because we agree on all you wrote above and most of what I have read from you

I am sorry read this article because I do understand what is coming whether or not we get our priorities straight and do this with honor and in collaboration rather than cannibalizing our society like mad dogs

This piece frightens me because it has happened in the past-----but not in Argentina, Iceland, Greece, Ireland---not yet and I think not ever. But we in the US are not survivors-----our obesity, poor health in general, our complacency and dedication to our own enslavement---these are signs of a society that will not survive---and you know this as well as I do.

Jack London was a great writer and great drunk because he was a visionary---one of my favorite guys

I wish Jack was among us today because his voice would be clearly heard and he would be merciless with TPTB----he didn't tolerate them the last time income disparity was this great----the 'golden age' of robber barons---the same old shit, brother----it just never ends unless you are extremely vigilant

AND WE WERE NOT----and we like our slavery and it is not going to help us with what is coming

Thanks barliman---I read the rest, but I never worry about people that have more money than I do---they can take care of themselves, right? They do not need you or I---except to say 'no-that is not an acceptable response---you made the mess--YOU clean it up---with YOUR money, please'

I shoulda been a fucking preacher---maybe next lifetime---

For now, I say 'on january 1st, 2013-----all deposits in banks in the us will be backed by us dollars, gold, and silver'----and all derivative contracts null and void---and may some among you be left standing

There is enough for everyone---after that you can stack all you want

thanks      om

 

  • another.
  • The derivatives are the economic false sense of security created to generate a global "wealth boom" over the past 10+ years. They SHOULD have been taken apart over the last 4 years. That did not happen because the Bernanke's of the world believed they were smarter than the markets and KNEW the first country to try to unravel them would pay the highest price economically (see the first two bullet points). They decided to try to set pi equal to 3.0000000000000000000000000000000000000 themselves when they started down the path of attempting to devalue their respective fiat currencies. If one country does it, it helps ... some ... for a little while. When every country tries to race every other country to the bottom on currrency devaluation - IT DOES NOT WORK AT ALL.
zhandax's picture

Barliman, would you object to another view of your reasons?  After declaring these instruments null and void, the net result is the owners of hard assets still own them, and those with virtual claims on them will take it up the ass.  Who really cares in what order?  They are all going down anyway, and will realize it quickly.  Removing all this fictional virtual wealth from all the banks and multinationals and bankrupting them is nothing but positive in my book.  In a bankruptcy, the assets are sold to the highest bidder.  Those divisions of multinationals who make a product in demand will find ready bidders, if it is you offering 100 gold buffaloes for Deere's replacement parts division (all of it, manufacturing to sales).  Or if 100 gold buffaloes won't cut it, perhaps you pool resources with a dozen others of like mind.  It is no longer like there is an M&A department left open or or you can just walk into JPM with a killer biz plan.  Hard assets talk at whatever the highest bid available.  In bankruptcy, there is no such thing as withholding assets from sale to avoid MTM.  And those newly-created companies formed from those bargain assets will now be too small for arrogance, rather than TBTF.  There will be rampant unemployment and people will re-discover that grasshoppers are edible because WalMart's shelves will be empty.  Don't worry about oil, because with the government unable to borrow money, everyone will be walking.  Don't believe I don't realize how painful this will be; but just like the depression of 1921, it will be over faster than anyone can realize.

This is the view by doing this deliberately and broadcasting what to expect via MSM.  The kick-the-can alternative, where this occurs spontaneously and suddenly it looks like nobody is driving the bus is where you get the normally stable people going apeshit with Kalashnikovs.  Those predisposed to that kind of action will do so simply because their SNAP cards no longer work under either scenario.  The 'Minsky moment', or whatever you use to refer to the events already set in motion will lead to many of the same outcomes.  My support of illyia's argument is simply that it will produce less collateral damage, and lead to a speedier and healthier eventual recovery.

zhandax's picture

Damn, oldman, it took me that long to write this?

oldman's picture

@zhandax

Thanks Zhandax

This is the best articulation of the MSM propaganda that I have heard----I never think about these things because survivors work these things out---a 're-set'

Painful is slowly starving to death---not losing paper property

really well said                    om

boiltherich's picture

I think what Illiya is trying to get at is this, if those derivatives had actually CREATED anything, money, traded 700 trillion dollars worth of some kind of stuff, then inability to satisfy counterparty obligations would indeed be a serious problem triggering a total collapse of our way of life.

But, those 700 trillion in derivatives are ghosts in the financial system, promises made between private parties that never did and never could have paid off in the event they were ever triggered. If they were ever triggered by real life events they would all be mutually extinguishing. The writers, buyers, sellers, traders invented them and INVENTED economic claims on our productivity they never had a right to. In order for these products to do the economy any real harm they would have to have first generated some real good. They are no more real than if I up and decided to write an IOU for 700 trillion and take it to my bank as collateral on a loan.

Clearly that would be fraudulent, but would they call the cops or the SEC on me? No, because it would be more pathetic than criminal. In order for those derivatives to have any value they would first have to have created that value, you can't lose something that was never created.

I do not worry about what happens AFTER the derivatives are triggered because they will have no impact, they will be confetti, the holders can't make claims on stuff that does not exist and they can't make claims on you and I that they have no legal right to, it is how they affect decisions in business and finance BEFORE they are triggered that has me P.O.'ed about them, because big corporations, banking and finance, government even, are making decisions about production and employment based upon an aversion to the risk of triggering these instruments, and that is only going to get worse till they blow up. Then we will see that they were nothing to worry about all along.

We do need a ballsy reformer that understands how the fiat banking system and credit system works, I do wish Paul had ever had a chance, now that he is out of the running I wonder who on the horizon can do the job because Dr. Paul is just too elderly for another run in 2016.

XitSam's picture

If I understand your proposition correctly, since they (generally bankers) owe all this deriviative stuff to themselves, when it gets wiped clean we won't be affected.  But what happened is that pension funds and ordinary bank accounts are involved, there was a transfer of wealth, leveraged, in the creation of these instruments that will get destroyed and ordinary people literally1 starve. 

1 Yes I do mean literally. And starvation is an ugly thing. Worse because 99% won't understand why.

illyia's picture

Yes XitSam, starvation is an ugly thing - but it is going to happen anyway - occasionally at the end of a gun - or worse. Things will become horrifying no matter what. And, "We The People" - of the last 30 years - are the ones who let it happen. There is a certain amount of justice in that. Right now (and I am not under any circumstances promotine OWS-type actions) we are allowing this idiocy to continue.

The plain fact is that the Over The Counter, Off Balance Sheet, 700+ Trillion in derivatives are Accounting FRAUD. They cannot be used in safety - except: Like any "good" Ponzi Scheme, the first out get paid.

That has already happened. We are now heading for the next stage and the beginning of complete debasement of our vaunted currency... over however many months or years the doobees can stretch it. All for our own good. Because we need our finance system and government to function. Until. It. Stops.

I will not let up on this subject. I hope thoughtful ZHers will continue to think and write on this issue. It appears to me that retroactively denying the derivatives legality is the ONLY rational path to a reasonable future for the coming generations.

oldman's picture

@boiltherich

Hey boil,

WE are the 'ballsy reformers' of:

"We do need a ballsy reformer that understands how the fiat banking system and credit system works, I do wish Paul had ever had a chance, now that he is out of the running I wonder who on the horizon can do the job because Dr. Paul is just too elderly for another run in 2016."

Ron Paul is just the tip-----of WE-----and his work is done because WE are here together

I'm pretty damned optimistic this morning after reading your comments and the others. I've been waiting for this shift for more than 40 years. The derivatives are just the paper promises of criminals and 'gimmee guys'.

Nothing to worry about because it is already done-----our response is what is important-----and it does not have to be only 'guns and gold'.

It is all coming together----om

illyia's picture

oldman,

you (and some others) might find this interview with Dylan Ratigan interesting. On Financial Sense two days ago. Dylan has a pretty good grasp on the entire situation. I believe he was/left CNBC because he could not stomach the restrictions. He's been somewhat sidelined on MSNBC 4 pm slot (when most are on the road or just done for the day). But he's got a different take on things, and it is one that I share. This is an mp3/voice interview. Select which medium you like.

Dylan Ratigan: The Troubling Revolving Door Between Federal Reserve Officials and Wall Street

http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/05/30/dylan-ratigan/revolving-door-between-federal-reserve-officials-and-wall-street

There are several other interesting things on the slate for this weekend, as well.

Peaceful Evening,

i.

grid-b-gone's picture

95% of the derivatives market is owned/controlled by the top handful of banks - the same banks that own the Federal Reserve - the same banks that drafted major sections of Finreg - the same banks that insisted derivatives not be regulated - the same banks that agreed to allow an open market system for derivatives and then ignored it - the same banks that still dominate sub-prime through the sub-prime auto financing loophole (specifically making it legal to knowingly bundle and bet against risky loans) ...

After going through all that trouble, do you think they will allow their $700 trillion masterpiece to simply be declared null and void?

On the contrary, somewhere there has got to be the legal justification giving derivatives senior debt status, otherwise, all their effort will have been for naught. Otherwise, they would have created the public trading mechanism to offload derivatives to a greater fool by now. Why, knowing the end game, are they insisting on holding such leveraged Ponzi insurance claims?

Own outright everything you need. You are only a caretaker for any asset you don't 100% own.

oldman's picture

@grid-b-gone

I don't know what the numbers are, but if this is true:

"95% of the derivatives market is owned/controlled by the top handful of banks - the same banks that own the Federal Reserve - the same banks that drafted major sections of Finreg - the same banks that insisted derivatives not be regulated - the same banks that agreed to allow an open market system for derivatives and then ignored it - the same banks that still dominate sub-prime through the sub-prime auto financing loophole (specifically making it legal to knowingly bundle and bet against risky loans) ...

After going through all that trouble, do you think they will allow their $700 trillion masterpiece to simply be declared null and void?"

then retoactively outlawing it and demanding the Fed take the loss instead of the nation seems like the only way out for a society with 'odious debt'. The Fed and the banks COULD just unwind it if it is as you wrote above. All we do is go into the street and stay out until we find out if the military backs the banks or the Constitution. 

Oh yeah, and-----we clawback the ill-gotten gains + interest, and they make the pension funds whole. If they leave the country, I am certain that wecan still recoup something substantial from the sale of their remaining assets, and------that we can come up with a better way of managing our affairs.

I'll even come back to the states to go in the streets.

Yes, I'd like that----it would be a demonstration of human dignity and courage

Much better than being a whipped dog                                  om

BlandJoe24's picture

Where are you choosing to live (to "come back to the states" from)?  Just curious where you think it's better to live.  thanks.

Ookspay's picture

I respectfully disagree. The collapse will come suddenly. Some will see signs and precursors a few days in advance, most people will not see it coming.

You will see or hear an emergency warning, pick up your cell phone, Dead! Traffic jams, mass chaos, 60 minutes to the stoneage. 12 months of hell before the reset and a Global Currency. Or perhaps WWIII...

Have a nice day! : )